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What's in Store for Extended Stay (STAY) in Q3 Earnings?
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Extended Stay America, Inc. is scheduled to report third-quarter 2016 results on Oct 25, before the opening bell.
Last quarter, Extended Stay posted a positive earnings surprise of 10.71%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 8.16%.
Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
Extended Stay has been renovating its properties lately which has hurt its occupancy rates and has been a drag year-to-date. However, it is expected to be a positive for the third quarter with an expected 60,000 reduction in room nights displaced year over year, although the cost related to the same could continue to hurt profits.
Again, the company’s lack of exposure to the emerging markets might limit its revenue growth potential in the third quarter.
That said, the transformational initiatives undertaken by Extended Stay should continue to aid RevPAR as hotels that have already been renovated are witnessing increases in Average Daily Rate (ADR) and occupancy levels. Moreover, various sales and marketing initiatives, and limited exposure to inbound international travel are likely to drive the top line.
The company provided specific third-quarter guidance with its Q2 earnings release. Therein, it expects total revenue of $348 million to $355 million, which represents growth of approximately 2–4% over Comparable Hotel revenue in the third quarter of 2015. This outlook reflected the pace of revenue growth till then and is also reflective of the company’s renovation activity. The company also expects adjusted Earnings Before Interest Tax Depreciation & Amortization (EBITDA) of $175 million to $182 million during the quarter representing 1.2% to 5.2% adjusted EBITDA growth on a Comparable Hotel basis.
Our proven model does not conclusively show that Extended Stay is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Extended Stay has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate as well as the Zacks Consensus Estimate both stand at 34 cents.
Zacks Rank: Extended Stay has a Zacks Rank #3. This when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the broader consumer discretionary sector to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Boyd Gaming Corporation (BYD - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #2.
Regal Entertainment Group has an Earnings ESP of +4.00% and a Zacks Rank #3.
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What's in Store for Extended Stay (STAY) in Q3 Earnings?
Extended Stay America, Inc. is scheduled to report third-quarter 2016 results on Oct 25, before the opening bell.
Last quarter, Extended Stay posted a positive earnings surprise of 10.71%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 8.16%.
Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
Extended Stay has been renovating its properties lately which has hurt its occupancy rates and has been a drag year-to-date. However, it is expected to be a positive for the third quarter with an expected 60,000 reduction in room nights displaced year over year, although the cost related to the same could continue to hurt profits.
Again, the company’s lack of exposure to the emerging markets might limit its revenue growth potential in the third quarter.
That said, the transformational initiatives undertaken by Extended Stay should continue to aid RevPAR as hotels that have already been renovated are witnessing increases in Average Daily Rate (ADR) and occupancy levels. Moreover, various sales and marketing initiatives, and limited exposure to inbound international travel are likely to drive the top line.
The company provided specific third-quarter guidance with its Q2 earnings release. Therein, it expects total revenue of $348 million to $355 million, which represents growth of approximately 2–4% over Comparable Hotel revenue in the third quarter of 2015. This outlook reflected the pace of revenue growth till then and is also reflective of the company’s renovation activity. The company also expects adjusted Earnings Before Interest Tax Depreciation & Amortization (EBITDA) of $175 million to $182 million during the quarter representing 1.2% to 5.2% adjusted EBITDA growth on a Comparable Hotel basis.
EXTENDED STAY Price and EPS Surprise
EXTENDED STAY Price and EPS Surprise | EXTENDED STAY Quote
Earnings Whispers
Our proven model does not conclusively show that Extended Stay is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Extended Stay has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate as well as the Zacks Consensus Estimate both stand at 34 cents.
Zacks Rank: Extended Stay has a Zacks Rank #3. This when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the broader consumer discretionary sector to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Boyd Gaming Corporation (BYD - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #2.
Live Nation Entertainment, Inc. (LYV - Free Report) has an Earnings ESP of +6.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Regal Entertainment Group has an Earnings ESP of +4.00% and a Zacks Rank #3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>